2019 (10) TMI 864 - HC - GST

Court sets aside order due to violation of natural justice, directs fresh hearing for Petitioner.

Hardcastle Restaurants Pvt. Ltd. Versus Union of India, through Secretary, Ministry of Finance (Department of Revenue), The National Anti-Profiteering Authority, Director General of Anti-Profiteering,

The court set aside the order of the National Anti-Profiteering Authority due to the violation of natural justice principles. The Petitioner was directed ... Proceedings before the National Anti-profiteering Authority - section 171 of the Goods and Services Tax Act - main contention of the Petitioner is of violation of the principles of natural justice - HELD THAT:- The presence of a member of the Authority during the hearing is not a formality. Multi-member panels are constituted so a decision through discussion and exchange of opinions takes place. The litigant is entitled to be heard by all members who are the ultimate decision-makers so the litigant can try to convince each member of the adjudicating Authority. Therefore oral hearing is clearly contemplated and the argument of the Respondent that since all the record was before the Authority, there is no illegality in the fourth member in signing the order, is not correct. If the scheme itself provides for hearing by all members, not giving hearing itself will cause prejudice. Therefore the argument of the Respondents that there is no prejudice, also cannot be accepted. The issues that come up before the Anti-Profiteering Authority are complex. The Act and Rules provide no appeal. The Authority can impose a penalty and can cancel the registration. The term profiteering, under the Act and Rules, is used in a pejorative sense. Such a finding can severely dent the business reputation. The Authority is newly established. Therefore, as a guidance to this Authority, highlighting the importance of fair decision-making is necessary. The impugned order passed by the National Anti-Profiteering Authority is set aside - the proceedings before the National Anti-Profiteering Authority – Respondent No.2. stand restored. Issues Involved:1. Violation of Principles of Natural Justice2. Jurisdiction of the Authority3. Methodology for Determining Profiteering4. Impact of Input Tax Credit Withdrawal5. Procedural Irregularities in Decision-MakingIssue-wise Detailed Analysis:1. Violation of Principles of Natural Justice:The main contention of the Petitioner was the breach of natural justice principles, as the final order was signed by a member who did not participate in the hearings. The Petitioner argued that since the hearing was conducted by three members and the order was signed by four, it violated the principles of natural justice. The court noted that the Anti-Profiteering Authority's proceedings are quasi-judicial and entail civil consequences, thus requiring adherence to natural justice principles. The court emphasized that oral hearings are contemplated in the statutory scheme, and all members who hear the case must participate in the decision-making. The court concluded that the involvement of the fourth member, who did not hear the case, resulted in a violation of natural justice, rendering the order invalid.2. Jurisdiction of the Authority:The Petitioner contended that the Authority's jurisdiction was limited to the product for which the complaint was filed and could not be extended to all goods and services. The Authority, however, held that the Director-General could investigate beyond the specific product mentioned in the complaint. The court did not explicitly rule on this issue, leaving it open for further consideration.3. Methodology for Determining Profiteering:The Petitioner argued that there was no established methodology for determining profiteering, making the exercise arbitrary. The Authority countered by stating that it had framed its own methodology. The court noted that the Rules empower the Authority to determine the methodology and procedure for assessing whether benefits of tax reduction have been passed on to consumers. However, the court did not delve deeply into the adequacy of the methodology, focusing instead on procedural fairness.4. Impact of Input Tax Credit Withdrawal:The Petitioner claimed that the reduction in GST rate was neutralized by the withdrawal of input tax credit, which was not adequately considered by the Authority. The Authority held that the Petitioner could not avail input tax credit after the rate reduction and thus had to pass on the benefit to consumers. The court did not make a definitive ruling on this issue, leaving it open for further examination.5. Procedural Irregularities in Decision-Making:The court examined whether procedural irregularities, such as the signing of the order by a member who did not participate in the hearings, invalidated the decision. The court held that the principles of natural justice require that all members who hear the case must participate in the decision-making process. The court rejected the Respondents' argument that this was a mere irregularity, emphasizing that such a breach affects the merits of the case.Conclusion:The court set aside the impugned order dated 16 November 2018 passed by the National Anti-Profiteering Authority due to the violation of natural justice principles. The proceedings were restored, and the Petitioner was directed to appear before the Authority for a fresh hearing. The court kept all contentions on merits, jurisdiction, and validity of the Authority open for future consideration. The Rule was made absolute with no costs.